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EU-Canada Trade Agreement Wins European Parliament Green Light

The European Parliament approved a landmark free-trade agreement with Canada, shoring up Europe’s market-opening clout in the face of a populist surge across the continent and U.S. President Donald Trump’s protectionist tilt.

The European Union assembly’s endorsement of the first EU commercial deal with a fellow member of the Group of Seven leading industrialized nations paves the way for it to take provisional effect once the Canadian Senate gives its green light, expected within weeks. EU governments and Canada’s House of Commons have already given their approval.

The EU Parliament backed the pact by a vote of 408 to 254 on Wednesday in Strasbourg, France, fending off a veto drive by far-left and far-right European parties that have echoed Trump’s criticism of globalization.

“This is Europe’s answer to Trump’s trade policy,” said Manfred Weber, German head of the Christian Democrats in the 28-nation assembly. “Instead of protectionism, we want partnership. Instead of fear and mistrust of each other, we want openness and even stronger ties with one of our closest allies.”

The agreement with Canada has become a test case for the EU’s political credibility and commercial heft since Britain voted to leave the bloc, a Belgian region nearly scuttled the Canadian accord and Trump turned the U.S.’s back on multilateral trade pacts. Three years of negotiations on an EU-U.S. trade deal have been put on hold since Trump took office in January and let loose proposals for American import taxes.

“The approval by the EU Parliament of the Canada accord means the biggest political crisis in European trade policy has finally bottomed out,” said Hosuk Lee-Makiyama, director of the European Centre for International Political Economy in Brussels. “Europe’s political capital has stopped bleeding away. It’s an important deliverable politically.”

The deal, known as the Comprehensive Economic and Trade Agreement, is slated to end 98 percent of tariffs on goods from the outset and 99 percent after seven years (each side plans to dismantle all industrial tariffs and more than 90 percent of agricultural duties). Markets for services and public procurement are also due to be opened.

The EU says CETA, which took five years to negotiate, would boost the bloc’s economic output by around 12 billion euros ($13 billion) a year and expand two-way trade by about a quarter.

Once viewed as the precursor of the much-touted EU-U.S. plan for a Trans-Atlantic Trade and Investment Partnership, CETA now looks like a smaller substitute for TTIP as European officials expect Trump to put it in the “freezer.” In addition, the approval of CETA keeps momentum behind a series of separate EU trade negotiations with other countries including Japan.

The EU is Canada’s No. 2 trade partner after the U.S., and Canada is the EU’s 12th-biggest, according to the European Commission, the bloc’s Brussels-based executive arm. EU-Canada trade in goods was 63.5 billion euros in 2015, while services commerce totaled 27.2 billion euros in 2014.

Canadian Prime Minister Justin Trudeau, who is due to address the EU Parliament on Thursday in Strasbourg, signaled last October that the bloc’s raison d’etre would be in doubt should CETA falter during the ratification process.

Final ratification of CETA in the EU requires the approval of national and even some regional parliaments. During the planned provisional application of the accord, controversial provisions on protection for foreign investors won’t apply.

The chapter on so-called Investor-State Dispute Settlement remains a lightning rod even after being scaled back. The new ISDS provisions foresee an Investment Court System in which publicly appointed judges rather than arbitrators would hear cases and an appeal tribunal would be established.

National elections later this year in the Netherlands, France and Germany, three founding EU members in which anti-establishment political forces have made advances, could offer signals about the path in Europe toward final ratification of CETA.

Trade is a core European policy and the EU’s push over many years to use its economic weight to open markets worldwide has been a central argument for the merits of membership. Should the EU falter at the national level in ratifying the deal with Canada, the bloc risks losing credibility both with global partners and with a host of its own trade-friendly member nations long allied on commercial matters with Britain, which is due to trigger by the end of March two years of Brexit talks.